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Governor Releases 2010-2011 Budget

Yesterday Gov. Granholm presented her fiscal year 2010-2011 Budget to a joint session of the House and Senate Appropriations Committees. Her proposal relies on a new sales tax on services, future reductions in the MBT, a large infusion of federal stimulus dollars and some reforms.

The sales tax proposal would lower the current sales tax rate from 6% to 5.5%, but it would expand the tax to include most consumer services. There are exclusions for health care, social assistance, education, new construction, real estate, insurance commissions, and services directly connected to business operations or business-to-business transactions.

The proposal does include business tax relief as well. The MBT surcharge would be phased out over two years beginning in 2011. The MBT’s gross receipts tax rate would be lowered from 0.8 percent to 0.6 percent over two years as well beginning in 2012.

Her plan also includes roughly $556 million in cuts and reforms to state operations, and also relies on approximately $700 million of federal money that has not yet been approved by Congress.

It is extremely disappointing that the administration did not lead more with structural reforms and cuts to meet the $1.7 billion structural gap in the General Fund/General Purpose (GF/GP) budget. Furthermore, the Governor relies on a new services tax while phasing in over time some reductions to the Michigan Business Tax (MBT). This represents a tax hike of over $500 million with a promise that the MBT will be phased out only after the Governor has concluded her service to the state.

We continue to work with our elected officials to pass meaningful reforms to the way government operates before they even consider any tax increases.

SBAM Testifies Before House Committee on Economic Development

This week, SBAM President and CEO Rob Fowler made a presentation before the House New Economy and Quality of Life Committee.

The central topic of the hearing was “Michigan at the Crossroads:  Ideas for Michigan’s Economic Development.”  Chairman Ed Clemente invited SBAM to speak on this important topic.

The SBAM presentation focused on economic gardening.  The concept of economic gardening is centered on an economic development theory that more should be done to provide a friendly business environment and the tools needed to assist businesses to start and grow in Michigan.

Fowler pointed out that currently the state’s economic development tools are primarily geared toward hunting.  Hunting is the idea of offering credits and incentives to attract companies to move here.  To support this argument we presented data from the Edward Lowe Foundation that looks at 15 years of job growth and loss.  The data shows that the vast majority of net job growth from 1993-2007 is a result of existing companies expanding; not new companies that come to Michigan.

SBAM contends that we need a more balanced approach with more of a focus on gardening and less on hunting.  Both should be used a part of Michigan’s economic development approach. 

The presentation also argued that we need to pursue a more horizontal approach rather than a vertical approach to helping businesses succeed.  One area of concern with the current strategy is that it awards businesses in certain types of industries instead of being a broad-based approach that would help all businesses.  The state should not be involved in picking winners and losers.  We should be helping businesses of all types grow and be successful.

We have been discussing the economic gardening approach with the various candidates for state office and will continue to do so throughout the year.

House Republicans Release Jobs Plan

This week, the House Republicans released a report that outlines their recommendations on how to improve Michigan’s economy and help create jobs.  The basic message of the report is that government should get out of the way.

The 33-page "Michigan Jobs Plan" is the work of the House Republican Strategic Task Force on Jobs. The plan culminates more than a year of research and fact-gathering from Michigan's job providers and business groups.

SBAM was one of the business groups that met with the task force to lend our thoughts and ideas to their report.  The report includes many proposals that SBAM has supported in the past and will continue to support in the current legislature. 

The challenge for the House Republicans is for their agenda to be taken up in the Democrat led House.  We will work with lawmakers on both sides of the aisle to make Michigan’s economy more competitive and to assist our small businesses.

To view the report click here

Election 2010

Bernero is in, Ilitch is out, Bowman is in and Ehlers retires.  It was another busy week on the Democrat side of the gubernatorial equation.  Also, long-time west Michigan Congressman Vern Ehlers announced that he will not be seeking re-election.

The question of who will be competing for the Democratic gubernatorial nomination is beginning to sort itself out.

This week, Lansing Mayor Virg Bernero announced that he would be running for governor.  Denise Ilitch, a Detroit area business executive with ties to the Detroit Tigers and Red Wings, has decided not to run, and former State Treasurer Bob Bowman (during the Blanchard administration) has decided he will run.  Bowman is currently an executive with mlb.com, which handles Major League Baseball’s internet operations.

This leaves House Speaker Andy Dillon and former Genesee County Treasurer Dan Kildee as the potential candidates that still need to make up their mind.  Bernero and Bowman join State Rep. Alma Wheeler Smith as the announced candidates.

In other news, U.S. Congressman Vern Ehlers has announced that he is will not be running for re-election to the 3rd Congressional District in the Grand Rapids area.  The 76 year-old Ehlers will retire after having served 9 terms in office.

Ehlers decision will open up a Republican primary campaign that is likely to attract a great deal of attention.


SBAM in the News Opposing Tax Hikes

SBAM was prominent in the news media today as a leader in opposing Gov. Granholm’s proposed tax hikes:

From the Detroit Free Press: “The sales tax on services is one we can't accept," said Rob Fowler, CEO of the Small Business Association of Michigan. "The state needs new revenues, but the way to get them is a growing economy.”

From The Detroit News: “We think the state has to live within its means," said Rob Fowler, president and CEO of the Small Business Association of Michigan. He noted that many of the association's members -- from landscaping companies to hair salons -- would certainly be affected by the service tax.”

Read more about SBAM’s views on the Governor’s plan by clicking here.

What do you think about the Governor’s proposal? Comment below or engage in the discussion with your fellow small business owners in our Action Forum.

 


Small Businesses Criticize Gov’s Overemphasis on Tax Hikes, Lack of Spending Reforms

The Small Business Association of Michigan (SBAM) is very disappointed with Gov. Granholm’s proposed 2010-2011 state budget. “Heavy on tax hikes, light on spending reforms and headed in the wrong direction in terms of the long term efforts that are going to be needed to revive the economy and grow jobs,” says SBAM President and CEO Rob Fowler.

 


Fowler cited the gloomy results of an SBAM survey of 400 small business owners, conducted in mid-January, that found:

 


•    52% of small businesses said their sales decreased in the past six months
•    47% had their profits drop
•    24% were forced to cut employees
•    67% could not afford to provide wage hikes
•    61% give a negative rating to the quality of Michigan as a market for their goods and services
   

 

“With the small business economy in such sorry condition, why on earth does this administration think it’s a good idea to propose a net tax increase that takes money out of the pockets of Michigan citizens?” asks Fowler. “Instead of tax hikes, small business owners demand a right-sizing of state government, accomplished with significant, cost-saving structural reforms. Just as they have had to do with their own companies, these entrepreneurs expect state government to adjust to economic realities.”

 

(Do you agree or disagree with SBAM's views? Leave a comment below.)

 


Get Tickets Now for 2010 Michigan Celebrates Small Business

Michigan’s outstanding, award-winning small businesses will be honored April 29 at the Lansing Center as the state’s major business organizations and agencies collaborate for the sixth annual “Michigan Celebrates Small Business” event. Tickets are available at michigancelebrates.biz.

 


“We are expecting over 1,000 in attendance at this year’s celebration,” says Jennifer Deamud, managing partner of Michigan Celebrates Small Business. “Michigan Celebrates is centered around entrepreneurs that are building Michigan’s economy. People want to acknowledge their success and this program does just that.”

 


Tickets are $135 per person or receive a 20% discount and reserve a table of eight for $850. The evening includes a cocktail reception, an address by the governor and the awards dinner at the Lansing Center in Lansing. Black tie is optional. Reasonable arrangements for persons with disabilities will be made if requested at least two weeks in advance. Contact: Jennifer Deamud, MI-SBTDC, (616) 331-7480, info@michigancelebrates.biz. To register by phone, call Pam Lantrip at 800.362.5461.

 


Michigan Celebrates Small Business is a premier annual program to recognize entrepreneurs and small business supporters in a variety of categories. The program is a cooperative effort of the U.S. Small Business Administration – Michigan, the Small Business Association of Michigan, the Michigan Economic Development Corporation, the Michigan Small Business & Technology Development Center and the Edward Lowe Foundation.

 


Underwriters for this year’s Michigan Celebrates Small Business event are National City (now a part of PNC), Clark Hill PLC, the Michigan Economic Development Corporation, the Michigan Certified Development Corporation, Accident Fund Insurance Company of America and Dynamic Edge Inc.

 


“We’re honored to have been the primary sponsor of this prestigious event since its inception 6 years ago ,” says David Morrison, Southeast Michigan Business Banking Market Manger with PNC. “Michigan Celebrates Small Business is very important to PNC because it recognizes those companies and individuals that have taken the risks necessary to grow our economy. At PNC we have a group of seasoned bankers that help those risk takers succeed.”

 


Don Lee, Chief Marketing Officer of Clark Hill PLC, says “Clark Hill is focused on second-stage companies wanting to stay and grow in the state of Michigan. We have established a team of experienced professionals that are committed to serving these companies. For 5 years, we have supported and watched the Michigan Celebrates Small Business event spotlight over 300 small businesses. Now going into the 6th year, we’re ecstatic about continuing our sponsorship and commitment of the event.”

 


Media partners for Michigan Celebrates Small Business are MiBiz, Crain’s Detroit Business, Upper Peninsula Business Today, the Traverse City Business News, Michigan Radio, Mitechnews.com, WWJ Newsradio 950 and the Greater Lansing Business Monthly.

 


Election 2010

A statewide poll has been released that shows who the early front-runners would be for the gubernatorial primaries in August.

On the Republican side, Attorney General Mike Cox holds the early lead garnering 32 percent.  Congressman Pete Hoekstra had 25 percent, while Oakland County Sheriff Mike Bouchard was third with 16 percent.  Ann Arbor business executive Rick Snyder had 3 percent and State Senator Tom George is picking up just 2 percent.  400 likely Republican primary voters were surveyed.

On the Democrat side, where most of the candidates have not yet made decisions as to whether they will be on the ballot, potential candidate Denise Ilitch holds the early lead with 23 percent; she is followed by Congressman Gary Peters (who has said he is not running) with 9 percent.  House Speaker Andy Dillon picked up 8 percent.  In a three-way tie were Congressman Bart Stupak (who has also ruled out running), Lansing mayor Virg Bernero and former Genesee County Treasurer Dan Kildee, all with 6 percent.  State Representative Alma Wheeler Smith and former State Treasurer Bob Bowman had 2 percent each.  400 likely Democrat primary voters were surveyed.

The poll also measured some potential general election match-ups.

According to the poll, Cox would beat Ilitch 48 to 30 percent.  He’d beat Dillon 47 to 30 percent, and he would beat Bernero 50 to 28 percent.

If Hoekstra were the nominee, the poll had him beating Ilitch 42 to 35 percent.  He’d beat Dillon 40 to 32 percent, and he would beat Bernero by 45 to 27 percent.


President Obama’s “Small Business Jobs and Wages Tax Cut”

During his State of the Union address last week, the president outlined a proposal called the “Small Business Jobs and Wages Tax Cut.”  Below is a synopsis of the how the various proposals will work.

SBAM’s national affiliate the National Small Business Association (NSBA) prepared the following summary of the program:

The goal of Obama’s plan is to encourage job creation by giving businesses a $5,000 per worker tax credit for new hires and refunds of payroll taxes paid if firms increase their workers’ wages. Obama’s $33 billion proposal is similar to a proposal made during his 2008 presidential campaign. The “Small Business Jobs and Wage Tax Cuts” is designed to provide a cost-effective, immediate jump-start to job creation and wage growth. The key provisions are:

1.  A $5,000 tax credit for each net new job created in 2010. Employers would receive a tax credit of up to $5,000 against their payroll taxes for every net new employee they hire in 2010. The credit is designed to help jumpstart job growth by giving employers an incentive to add jobs or accelerate the hiring they would have done later in the future. Start-ups would be eligible for half the credit, which provides an incentive for entrepreneurship while avoiding gaming. The credit would be administered off an employer’s unemployment insurance wage base (equal to 72 percent of the unemployment insurance wage base increase, or $5,000 credit for each additional worker who earns at least $7,000).

 

2.  An additional tax credit to reimburse payroll taxes on increases in inflation-adjusted payrolls. Businesses will receive a bonus 6.2 percent tax credit on aggregate wages in excess of inflation – reimbursing the employer for the Social Security payroll taxes they pay on those payroll increases. This provides firms with an incentive to increase wages or work hours for existing employees as well as hire new employees at a higher wage. This wage bonus would be calculated off the Social Security payroll tax base, so firms would not get credit for increasing wages for employees making more than the current taxable maximum of $106,800. 

 

3.  A cap at $500,000 per business to incentivize small business hiring. All firms with net employment increases will be eligible for these credits. But to ensure that small businesses receive the bulk of the incentive to hire, the maximum credit will be limited to $500,000 (100 employees) per business. 

 

4. Anti-abuse provisions to ensure that employers do not game the system. Businesses that reduce employment or payrolls in 2010 would be ineligible for both the $5,000 credit and the wage bonus. The credit would also include anti-abuse provisions designed to deny or limit the credit to employers that seek to game the system by, for example, replacing full-time employees with part-time employees. This will include limiting the maximum jobs credit amount to 25 percent of the increase in a firm’s Social Security payroll wage base. In addition, rules would prevent businesses from renaming themselves or merging in order to claim the credit. 
  1. Quarterly payment option to accelerate payments to firms. Employers would have the option of receiving the tax credit on a quarterly estimated basis. This helps get money in the hands of employers earlier in the year, could help increase awareness of the credit and provides an early incentive to hire. Non-profits will be eligible for the credit and start-ups will be eligible for half the credit. State and local governments would not be eligible.

The White House also said their proposal would make the incentives retroactive to Jan. 1, 2010.


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